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The Energiewende: An introductory look at Germany’s energy transformation

24 Jul 2013, 13:15

Mat Hope

Credit: Dirk Ingo Franke

Germany is considered one of the most
environmentally conscious countries in the world - but it wants to
do more. Decarbonising one of the world's biggest industrial
economies is no small task, and as Germany's government pushes
ahead with sweeping policy reforms, the world is watching to see
whether the Germans can pull it off.

The Energiewende - or 'energy transformation' - seeks to cut
emissions, ramp up renewable electricity, and halve energy
consumption, all while keeping the economy afloat. The
repercussions will be felt beyond Germany, with English-speaking
media already using the Energiewende to illustrate both the
benefits and
pitfalls of government-directed decarbonisation.

But there is some confusion over what the the transformation
entails. And debate about the Energiewende is far from settled in
Germany itself, with commentators continuing to argue over the
potential costs and benefits of the far-reaching reforms.

Transforming an energy system

Germany's government laid out its
energy reform plans in 2010, looking 40 years ahead. The plan
requires a radical overhaul of Germany's electricity generation,
heating systems, and energy efficiency standards.

The economics and environment ministries
declared the Energiewende would make Germany"one of the most
energy-efficient and greenest economies in the world while enjoying
competitive energy prices and a high level of prosperity."

The heady rhetoric was accompanied by a set of the kind of
high-level targets beloved of policymakers the world over. The
Energiewende sets an 80 per cent emissions reduction target by
2050, compared to 1990 levels. The government also aims for
renewable sources to provide for 80 per cent of electricity
consumption, and seeks to reduce the amount of energy Germany
consumes by 50 per cent, by 2050 compared to 2008.

The task of moving away from fossil fuels was made more complex
shortly after setting the goals when the government
ruled out nuclear power as a low carbon energy option.

Chancellor Schröder's government had committed to phasing out
nuclear
by 2022 at the start of the millenium. In 2010, Angela Merkel's
government decided to keep the reactors open, but in the wake of
the Fukushima nuclear disaster it changed course again, deciding
not to restart eight nuclear reactors that had been shut for
servicing, and again committing to phasing out Germany's remaining
nine reactors by 2022.

The decision has proved popular with a German public which
remains largely
hostile to nuclear power. But it does mean Germany is aiming
for more renewable electricity, less demand, and lower emissions -
all in a cost effective manner and without the aid of nuclear
power. Ambitious, indeed.

In practice

Targets are one thing, but putting them into action is
another.

The Energiewende touches on a wide range of sectors - from
electricity generation, to construction and transport - and seeks
to overhaul energy supply and demand management.

At the moment, generators get paid a fixed rate to supply
renewably-sourced electricity to the grid. This extra cost is
covered by a surcharge on household energy bills. In Germany, these
tariffs are guaranteed for 20 years, similar to the
UK.

Renewables support is popular with some sections of the public,
partially because a large proportion of renewables projects are
owned by them. 40 per cent of Germany's installed renewables
capacity was
owned by community cooperatives in 2010.

But the media and some politicians have blamed the subsidy for
rising energy bills. Germany's Environment Minister, Peter
Altmaier, has called for the end for a particular part of the
subsidy - which rises as more renewables come online - to be frozen
at current levels. He says the associated cost threatens public
confidence in the Energiewende. But Altmaier's proposal was
rejected at an energy summit between the federal government and
state representatives earlier this year.

Some subsidy reforms have already been carried out. In 2012, for
example, the government agreed to end new solar subsidies once
solar capacity reaches 52
gigawatt - almost
six times the UK's current installed capacity. Germany's
environment ministry says this could happen as early as
2014.

Energy consumption

Ramping up renewables is only part of the Energiewende plan.
Reducing energy consumption will mean making houses and appliances
more efficient, too.

In summer 2011, the government pledged
€1.5 billion of funding per year for a Building Rehabilitation
Programme. The government has also imposed strict standards on
electrical appliances by declaring the
most efficient products the 'standard', and banning any less
efficient new appliances from the market.

Reducing demand will also be necessary to balance a grid
increasingly reliant on renewable power. A power consumption market
opened earlier this month allowing companies to bid to
reduce demand at peak times. This could be cheaper and less
emitting than switching on fossil fuel plants to back up renewables
- most likely powered by gas. The market is still in its early
stages, with only around 500 megawatts of demand reduction bids,
but the scheme could be rolled out on a larger scale in a year's
time.

So the Energiewende is deploying a wide-range of policies to try
and create a low carbon economy in the most cost effective way.

Cost

As in the UK, the cost of supposedly 'green' policies is a political
flashpoint. Unsurprisingly, the estimated cost of the
Energiewende changes dramatically, depending on who you ask.

Altmaier caused controversy in February when he claimed the
Energiewende could cost Germany
€1 trillion over the next 20 years. But Altmaier's own
department previously calculated the cost as
closer to €203 billion.

The
MIT Technology review says the cost of the Energiewende has
been estimated as anywhere between €100 and €200 billion up to
2020, while
Businessweek says the it could cost around about €200 billion -
equivalent to about 8 per cent of Germany's GDP.

The figures change depending on whether or not the benefits of
the policies are included. Miranda Schreurs of Berlin Free
University says Germany's green technologies alone could be worth
around €9.5 billion. Environmental NGO, Green Budget Germany, says
benefits such as avoided environmental damage and the cost of
fossil fuel imports also need to be included in the calculations to
give the full picture.

As is often the case, estimates change depending on technology
and fuel prices, and how much benefit is expected to come from the
policies. All of those are uncertain, making it hard to produce a
precise estimate. But whatever the precise cost ends up being, it's
clear the Energiewende is a long term, multi-billion euro
project.

Where next?

Germany's strong green political
tradition, combined with public support for nuclear
decommissioning, may have laid the foundations for public
acceptance of the sweeping reforms - but it won't guarantee that
they can be enacted.

Manufacturing sector profits and benefits for communities who
invest in the renewables transition have helped maintain support
for the Energiewende. But there has been a
backlash in both the
German and
English-speaking media as critics question whether or not the
policies are being rolled out in the most cost-effective way.

The Energiewende is still in its early stages and is being
adjusted as it develops. Merkel's government still appears to be
committed to the transformation, though with September's elections
looming, the expense is making some politicians
nervous.

The Energiewende's ambition is undoubtable. But despite
Germany's clear commitment to long-term environmental policy, there
are still plenty of obstacles to overcome.